Studies of inherited metabolic diseases have led to discoveries of genes encoding proteins regulating levels of intracellular cholesterol and glycolipids. Niemann-Pick C disease results from a defect in either the NPC1 or NPC2 protein and is characterized by a pathological accumulation of cholesterol and glycolipids in endocytic cellular organelles. We followed the biosynthesis and trafficking of these two proteins with the use of a functional green or red fluorescent protein-fused NPC1 or NPC2 in living cells. Newly synthesized protein is exported from the endoplasmic reticulum to late endososmes. NPC1 and NPC2 containing late endosomes move by a dynamic process involving tubulation and fission followed by rapid retrograde and anterograde migration along microtubules. Cell fusion studies with normal and mutant cells show that exchange of contents between late endosomes and lysosomes depends upon ongoing tubulovesicular late endocytic trafficking. A striking finding about this newly appreciated late endosomal tubular traffic is that cholesterol accumulation retards to the point of inhibiting late endosomal tubular movement. Thus, study of NPC disease has uncovered the dynamic late endosomal tubular trafficking pathway which sorts lipids and is extremely sensitive to abnormal accumulations of cellular cholesterol. NPC1 and NPC2 proteins work in tandom to regulate cholesterol pools in late endocytic tubules which in turn maintains their dynamic mobility.